Egg prices plummet as supply pressure mounts

Free-range egg producers are facing considerable price falls as the market struggles under the weight of new supplies.

“Some packers have already reduced their prices paid to producers by as much as 14p per dozen. Others are to reduce their prices as from 1 June,” said Dennis Surgenor, secretary of the Scottish Egg Producer Retailers Association.

“Some people who have invested in new egg production units may not find the forecast profit they expected at the end of the laying year,” he continued.

The difficulties have been caused by a sharp rise in the size of the UK laying flock as expansion, particularly in the free-range sector, has raced ahead.

Total UK packing station throughput averaged 500,000 cases a week in the first quarter of 2010, a rise of 6%. However, free-range output was up over 20% year-on-year.

Data on pullet placings indicates this growth in the total UK laying flock will continue to September, when it could amount to 33.3m birds – a rise of almost 4m birds on a year earlier (see p19).

At Stonegate, Richard Kempsey said that so far there had been no change in producer prices, but that the situation was under review.

However, the packer had closed its books to all new contracts for the time being.

Fridays’ operations manager Martin Flegg also confirmed that producer prices were under review. Existing commitments to new producers would be honoured, but any further new contracts would depend upon market conditions.

But the NFU’s chief poultry adviser Rob Newbery believed the problem was a short-term one.

“We are going to have a rocky road in the next year or so, but long-term the fundamentals for eggs are good. There’s going to be good demand for British Lion eggs from all production systems.”

The present situation, which has seen wholesale egg prices drop by 35p/doz in just two months, should not deter producers from committing to the investment they had already started to make, he said.